Thomson details $17 billion bid for Reuters

CEO of joint firm to be Tom Glocer of Reuters, according to discussions

LONDON (MarketWatch) -- Thomson Corp. on Tuesday released details of its proposed takeover of Reuters Group, sketching out a scenario in which it would offer more than $17 billion to create a counterweight to Bloomberg L.P. in delivering financial data and news over terminals to brokers, hedge-fund managers and traders.

According to a joint statement on the merger talks, Thomson (TOC)
TOC, +3.74%
said it would offer 0.16 share and 352.5 pence in cash for each share of Reuters.
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(RTR) At Monday's prices, the offer values the company at 697 pence a share ($83.16 per ADR), or 8.76 billion pounds ($17.4 billion).

The companies, to be joined into a single firm called Thomson-Reuters, expect $500 million in annual synergies in three years. The Thomson Financial unit would be combined with Reuters financial and media businesses into a single unit under the Reuters name.

The Canadian media publisher also derives sizeable revenue from its legal, scientific, health-care and tax and accounting publishing arms.

Thomson's U.S. shares fell 4.8%, or $2.05, to $40.78. In afternoon London trading, Reuters shares rose 3% to 635 pence, though they were off session highs of 659 pence. See Europe Markets.

There's still doubt as to whether the deal will succeed. First, Reuters Founders Share Co., a trust that has veto power over any deal, must approve the transaction. The companies say they'd ensure that similar veto power would exist at Thomson-Reuters.

Competition regulators also would have to sign off.

A combination of the two companies would put their combined market share for financial data at 34%, compared with 33% at closely held Bloomberg, according to Inside Market Data, which tracks the information.

"We would expect close U.S. and European Commission regulatory scrutiny due to the over-20% estimated market share even on a broader definition of the market, including territory hotspots which could prove problematic," said analysts from Credit Suisse.

Analysts from Numis Securities, a U.K. brokerage, added that a counter-offer is unlikely.

"Although a rival bid cannot be ruled out, given the scale of synergies on offer and 40% bid premium, and also the obstacles raised by the Founders Share, we view Thomson as the bidder best placed to secure Reuters," it said in a note to clients.

Glocer in charge

Each company would keep its primary listing and the new firm would be run by Reuters's chief executive, Tom Glocer, 47, who has spearheaded a so-far successful restructuring drive at the U.K.-based company.

Reuters' stock was trading below 100 pence a share as recently as April 2003.

Thomson's 60-year-old CEO, Richard Harrington, would retire at the completion of the transaction.

Woodbridge, which is the Thomson family holding company, would hold 53% of Thomson-Reuters, other Thomson shareholders would control 23% of the combined firm, and other Reuters shareholders would combine 24% of the firm.

Reuters plans to pay a dividend of 12 pence for 2007, and if the deal doesn't close by 2008, pay out proportionately the same next year.

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